“CHIP”ing Away at Confusion over ACA Deadlines: Why You Need to Enroll Your Kids NOW

Uninsured Americans remain puzzled about the ACA deadlines for signing up for coverage.
Survey results indicate that more than 8 in 10 uninsured adults are confused
about the relevant dates. And it’s no wonder – not least because the deadlines
continue to shift.

To add to this confusion, some deadlines didn’t exactly move in the way that federal
officials suggested. Like, for instance, the federal fix to the “Valentine’s
Day” wrinkle in the ACA. HHS acknowledged that families that enroll in a
qualified health plan after February 15th would otherwise be subject to a federal
tax penalty for being uninsured for part of 2014. For this reason, HHS announced
on October 28, 2013 that it would exempt from the penalties those individuals who
enroll “…in a plan through the Marketplace prior to the close of the initial open
enrollment period. Curiously, though, the HHS guidance appears to apply only
to those in the tax credit program. HHS did not explicitly extend the same
exemption to children who enroll in CHIP in the same period.

Is the missing reference to CHIP a big deal? You bet: it could affect some
2.4 million uninsured children potentially eligible for CHIP across the United States.

These CHIP families still subject to the penalty are not “atypical” cases. Take
the example of a Tennessee family consisting of a mother, father, and two minor
children who apply for coverage at the marketplace in March 2013. With an
income of $58,500, the parents would be eligible for the tax credit programs – and
the children would be eligible for Tennessee’s CHIP program (“CoverKids”). In
this example, the parents would be exempt from the tax penalty because they enrolled
in a qualified health plan through the Marketplace during the open enrollment period
– but the family would still owe a penalty for those months at the beginning of
the year during which the nonexempt children were uninsured. Why? Because
the children qualify neither for the hardship exemption announced October 28, 2013
nor for the “short coverage gap” exemption (because their coverage takes effect
only on April 1, 2014).

But wait – doesn’t the ENTIRE family qualify for an exemption? No, not for
the hardship and short coverage gap exemptions. The parents in the above example
would be exempt for themselves but liable for the penalty for their two nonexempt
children. And here’s the awkward part: If the family made a little
bit more money – or lived in a state with a lower income limit for CHIP – then the
children could also qualify for the exemption because the October 28th guidance
would likely apply to them (because they would qualify for the tax credits).

The federal tax penalty for this family won’t be cheap. Given the structure
of the new tax penalties for being uninsured, this family would pay a pro-rated
amount of 1% of their income over their filing threshold (i.e., $96.25 for the three
months during which their dependents were uninsured). What a terrible
surprise for families at tax time!

Baffled? So are the families who are trying to figure all of this out.#160;

What should families do? The short answer is that they should enroll at their
earliest opportunity. We have also suggested that HHS provide formal guidance
expressly offering penalty relief to families with CHIP-eligible children that sign
up for coverage during the open enrollment period. In the absence of that
clarification, though, families should proceed as if they may be subject to the
penalty if they fail to enroll their children right away.

1 - PerryUndem Research/Communication, “The Uninsured Midway through ACA Open Enrollment,”
Report for Enroll America, January 9, 2014, available at http://www.enrollamerica.org/wp-content/uploads/2014/01/Perry_Undem_Uninsured_Survey.pdf,
accessed January 27, 2014 (reporting that 81% of uninsured adults age 18-64 do not
know when they need to sign up for coverage in order to avoid the tax penalty).
See also, Ehley, Brianna, “Confusion Over Deadlines Jeopardizes Obamacare,”
The Fiscal Times, January 27, 2014, available at http://www.thefiscaltimes.com/Articles/2014/01/27/Confusion-Over-Deadlines-Jeopardizes-Obamacare,
accessed January 27, 2014. See generally, Ornstein, Charles, “Deadline? What
Deadline? The Obamacare Sign-up Dates Keep Moving,” ProPublica, December 19, 2013,
available at http://www.propublica.org/article/deadline-what-deadline-the-obamacare-sign-up-dates-keep-moving,
accessed January 27, 2014.

4 - Estimates computed from U.S. Census Bureau, Current Population Survey, Annual
Economic and Social Supplement, 2012-13 using CPS Table Creator tool, available
online at http://www.census.gov/cps/data/cpstablecreator.html, accessed January
27, 2014. Specifically, we looked at the number of uninsured children between
age 0 to 18 between 125% and 250% FPL.

5 - As is the case for Tennessee’s CoverKids program, coverage dates for CHIP are
often prospective. See generally 42 CFR § 457.340 (providing flexibility for
states in setting effective dates of CHIP eligibility). Because the coverage
gap for such children may be at least three months, they may not qualify for the
short coverage gap exemption at 26 CFR §1.5000A-3(j) (limiting the short coverage
gap exemption for persons lacking coverage for “less than three months”).